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Eat & Drink

New report calls for end to Ontario booze monopolies

Posted by Derek Flack / August 20, 2014

LCBO MonopolyThe debate over alcohol sales in Ontario has heated up today thanks to a report from the C.D. Howe Institute that suggests a more competitive marketplace would benefit both consumers and the government's bottom line. Titled "Uncorking a Strange Brew: The Need for More Competition in Ontario's Alcoholic Beverage Retailing System," it recommends that wine and beer sales be allowed in grocery and corner stores and that licences be given to new wine retailers and off-winery stores.

"These changes would increase the choices available and reduce prices for Ontario consumers, as well as improve the competitiveness of Ontario's smaller wineries and breweries and generate more revenue for the government," the study reads.

The right-leaning C.D. Howe Institute is not the first to suggest the reform of liquor sales in the province. A 2005 government-requested report made similar recommendations, though it was ultimately disregarded by the Liberals at the time. Even as Ontario looks to slightly expand the sale of booze, it could be the same fate for this report despite all the talk that it will generate.

Discussion

54 Comments

gz / August 20, 2014 at 09:44 am
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aaaaand surely nothing will change
Pants Go Brown / August 20, 2014 at 09:45 am
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The LCBO, home of the world's most over-paid cashiers.
CD Howe / August 20, 2014 at 09:58 am
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CD Howe is a conservative think tank, for a start. I don't hear anyone complaining about the LCBO when it's helping fund health care.

Also, the Beer Store is NOT THE SAME as the LCBO. The Beer Store is a conglomerate of brewers. It's not a government-run entity in the same way. The Beer Store should be made into a beer-only wing of the LCBO.

There's no societal benefit to dismantling the LCBO system. It provides good paying jobs to help bolster the middle class, and it has a standardized set of rules for responsible alcohol management. There's no really great reason to dismantle it unless you're free market purist, in which case you have a private wine guy anyways.
jaaaaaaaaaat / August 20, 2014 at 10:04 am
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come to America and see what privatization + free market does to liquor stores. It ain't pretty. Its rather disgusting.

Also we need middle-class cornerstones like the LCBO to resist the ongoing wealth divide. Whats next? we dismantle the teachers?
Aaron / August 20, 2014 at 10:06 am
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Keep in mind, if that ever happens, there will be less choice of booze available. Privately-owned liquor stores will have less stock in hand too and with higher costs to purchasers.
Isn't it obvious / August 20, 2014 at 10:07 am
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Why is anyone paying attention to any group with an agenda? i wouldn't waste two minutes listening to a union report about the LCBO - the union has an obvious agenda. Does it surprise anyone that the C.D. Howe Institute says something so obviously right-wing? They have an agenda too.

When a thief offers to check out the quality of your wallet, do you hand it over to him?
Craig / August 20, 2014 at 10:09 am
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Why not listen to what ONTARIANS want, and have been telling the government is important to them? YIPPIE another make work report/proposal.
Al / August 20, 2014 at 10:09 am
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Go to a liquor store in Toronto. Then, go to one in Buffalo. You'll see we have the superior system even if they have lower prices.
Albin / August 20, 2014 at 10:10 am
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Nothing could be more predictable than C.D. Howe flacking privatization. My only beef with LCBO is that in these days of Amazon, a citizen of Ontario can't order delivery of any bottle in the catalog to the local store, rather than put up with the pathetic selections of lowest common denominator hootch in smaller communities. No reason anybody in Timmins should not be able to order anything on offer at Scrivener Square.
iSkyscraper / August 20, 2014 at 10:13 am
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Let's start by dismantling the Brewers Retail monopoly, which is patently insane and very harmful to craft brewers. When Ohio (pop 11.5M) has twice the number of small breweries as Ontario (pop 13.6M) you know you have a problem.

Then see how that plays out before deciding what to do with the LCBO and liquor/wine retail sales as a later phase.
Ryan replying to a comment from Al / August 20, 2014 at 10:14 am
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That's not a fair comparison. It's Buffalo.
Jim replying to a comment from CD Howe / August 20, 2014 at 10:14 am
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"unless you're free market purist"...OK so if I do not want to pay exorbitant taxes for beer or wine and want time and availability of when I can buy alcohol I'm a free market purist? Please. I have friend who works at upper management at LCBO and the money there is being farmed out everywhere. Like the tar sands it barely makes it in to the taxpayers pockets. We could also still make money from the tax of liquor without paying for large stores, massive overheads and salaries if it was not confined to the LCBO. We'd actually make much more for the economy. It's a monopoly and Ontario is the only place in North America with this silly and outdated system. It's not a charity for gods sake. If your income is based to ripping off the taxpayers it's time for a new job.
Why / August 20, 2014 at 10:17 am
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LCBO is fine. The Beer Store is the issue in Ontario.
Captain Obvsauce / August 20, 2014 at 10:28 am
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I don't think you have to be a "free market purist" to see the benefit in the province earning more money for things like healthcare and schools by simply opening up the market in a responsible way.

Maybe the government should also be running bars and breweries?
Todd replying to a comment from Ryan / August 20, 2014 at 10:31 am
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Fine.

Buffalo and Hamilton, two similarly sized cities.
Rob / August 20, 2014 at 10:33 am
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Instead of focusing on dismantling the LCBO monopoly, why aren't we focusing on the foreign-owned Beer Store monopoly? My suggestion would be to "nationalize" the Beer Store getting rid of its foreign owners and merge it with the LCBO. And, in addition to this, allow beer and wines to be sold in convenience stores and grocery stores. This isn't rocket science but only in Ontario is this difficult.
Ryan / August 20, 2014 at 10:40 am
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I just wanna be able to buy booze at 8pm on sunday.
Brent / August 20, 2014 at 10:46 am
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Not sure everyone here understands basic economics when they talk about all the "lost revenue" from privatizing the LCBO...they're forgetting the fact that the LCBO has massive expenses, too. It's an operating business. A dollar of revenue is not a dollar of profit so the province wouldn't have to replace every dollar of revenue; probably more like only 20-30 cents of it if replaced with privatization (ie a franchising-type model).

It would be much more efficient to privatize, add a couple bucks in taxes to alcohol purchases, collect licensing fees from storeowners and encourage further growth of the province's brewing and winemaking industries, among others. All these activities create incredibly high margin dollars for the province and free it from the burden/headache of running a business.
Brent replying to a comment from Brent / August 20, 2014 at 10:50 am
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And, oh yeah, we wouldn't have the shitty, overpriced and uniform selection we have now. We can actually get interesting small-production wines and a consistent supply of good craft beers (as opposed to the LCBO constantly rotating stuff as part of a pre-determined lineup...if you liked something you bought last week, too bad because it's gone now, never to return)

I suppose if you only drink 20 Bees wine, Absolut vodka or Sleeman it wouldn't make a difference to you...
Doug replying to a comment from Brent / August 20, 2014 at 10:55 am
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WOW 20 Bees that's below the belt!
Anne / August 20, 2014 at 10:59 am
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I love the selection at the LCBO. Many times I've traveled the world and discovered a new wine or liquer and will have that trip be a memory for me and I can get my new discoveries once I'm back at home at the LCBO.
GRAARG / August 20, 2014 at 11:13 am
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The report is spot on. Best example is what Alberta went through – allowed free market at the retail level which resulted in increased consumer satisfaction and increased liquor taxes.

The problem with the LCBO is that it has negative value – it is a liability for our government. The right to sell booze is worth a huge amount. The problem is that the LCBO itself (the retail arm that is) only has value if it retains a monopoly. The moment the LCBO loses its monopoly it becomes a massive liability for the government.

What the report fails to mention is that taking the monopoly power away from the LCBO may result in increased revenue in liquor taxes (7% according to the report) but the retail arm of the LCBO instantly becomes a massive liability completely obliterating the gains. Most of the new stores are on long term leases with very punitive exit clauses not to mention the massive gong show (and massive costs) that terminating the labor agreements would result in.

This is no accident. The LCBO has very deliberately engineered lease agreements on their stores and structured labor agreements in such a fashion that massively deters the government from removing the monopoly from them.
Chuck / August 20, 2014 at 11:20 am
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For me it is pretty simple: I want the government to fix the roads and keep schools running and some other pretty basic things. I have no idea what the argument is for them being in charge of distributing alcohol. It doesn't work this way anywhere else. The argument that it is profitable is irrelevant for me. Banking is profitable; should the government take it over? Of course not.

Regulate it. Tax it. Let the small business owner on the corner make a little money from it. The sky will not fall and the world will make sense again.
Are you all Drinking the Kool-Aid / August 20, 2014 at 11:42 am
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Maybe Ontario is the place using this bizmeth because we're best of breed and actually leading by example.

Ontario is massively in debt and we're barely paying off the interest. We need all the levers to our advantage to get out of this massive debt. I'm not saying the LCBO isn't trying to boil the ocean they are, they need to do a deep dive right down to a granular level and modified to efficiencies and some expenses should reviewed and cut where there's low hanging fruit.
Go Private / August 20, 2014 at 12:19 pm
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Looks like a lot of LCBO employees are dashing here to tell us that we are lucky to be paying twice what Americans pay for booze. Sale of alcohol will never be completely privatized in Canada. Even in Alberta (which likes to think of itself as having privatized liquor sales)every drop of liquor is sold to the shops by the Government of Alberta. Quebec's SAQ is almost identical to the LCBO, which most people don't seem to understand. Buying a bottle of Scotch in Quebec is no different than buying a bottle of Scotch in Ontario, except that you have to pay more in Quebec.
Josh / August 20, 2014 at 12:21 pm
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Another self-serving 'study' by the ideologues at C.D. Howe. Yet even irrespective of their ideology, their report is neutered from the start (and by their own admission) and thus their recommendations are irresponsible.

How could you possibly recommend privatization and expansion like this without taking into consideration any social costs this might have on society, especially when they are recommending policy changes. Everyone would love to pay less for alcohol but it would be careless to disregard the social consequences of doing so.

Before making concrete recommendations, the intelligent thing to do would be to study what greater access and cheaper prices on alcohol could lead to. For instance would it lead to greater deaths (alcohol abuse, auto-accidents,) greater violence (violence towards women, male on male violence)? Would it lead to a higher rate of hospitalization due to accidents and intoxication and how much would that cost society both morally and in monetary terms? And as economists its just plain lazy that you wouldn't take into consideration the potential for productivity loss when more people drink and drink more. Productivity loss costs the province and costs tax-payers and a potential increase in revenue may be made negligible by a loss of productivity due to missed work days, hang-overs, accidents etc.

My point isn't that we should ban alcohol or completely disregard what these guys say. It's just that you have to look at this thing in context and holistically. It's much more than just dollars and cents and could have greater consequences than at first appearance. You can't make policy recommendations like this without first studying and understanding the possible wider social consequences of doing so.
Sarah replying to a comment from Chuck / August 20, 2014 at 12:26 pm
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Just because people have a different view then yourself lets not go jumping the gun saying its LCBO employees. OR are you an employee of C.D. Howe defending your own report.

I do not work for the LCBO in anyway BUT I have no problem with the LCBO at all. I think the focus of attention should be put on the Beer Store not the LCBO.
Socialdrinker replying to a comment from jaaaaaaaaaat / August 20, 2014 at 12:51 pm
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Totally disagree with Jaaaaaat. US liquor stores have amazing selections, way better prices, better hours, and are in more convenient locations. For Canadians who think the LCBO is great, a real eye opener would be to visit the New Hampshire liquor stores. Really good prices! Huge selection!
Gary / August 20, 2014 at 12:55 pm
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We need bars to be able to serve alcohol 24 hours a day or at least until 5 am. Why is closing time so early? I don't go out until after midnight, so 2 am closing time is way too early for me.
DirtyT / August 20, 2014 at 01:14 pm
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I've never understood why anybody has any problems with the LCBO. They provide a great selection of products (much better than most private retailers I visit down south). They pay their employees great wages (not something a private retailer would do at all). And they keep their prices static no matter where they are... (Do you really think a private liquor store in Timmins is going to be able to sell that six pack for the same price as a private liquor store in Toronto?)

I don't like The Beer Store and I rarely shop there (unless I need generic beer in bulk for a party) so I could care less if they end their particular "monopoly", but why mess with the LCBO?
Diva replying to a comment from Gary / August 20, 2014 at 02:12 pm
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You need to get out of the house earlier. We're not gonna change the entire system because it takes you 6 hours to get ready and prepare so you can present yourself to the public.

Thanks.
kbryan / August 20, 2014 at 02:13 pm
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The LCBO/Beer Store duopoly is nonsense. What possible government interest could there be in ensuring that I can't have wine sent to me from a winery I enjoy, or that I can't buy the beer I want. In downtown Toronto, you are lucky if you can find even a single bottle of a Belgian gueuze (or any other lambic); if you were to visit Chicago or Philadelphia or any other similar size city, there are literally entire stores specializing in Belgian beers.

If the concern is about low-rent corner liquor stores, I have no objection to a price floor; sin taxes on alcohol are totally reasonable. I would also point out that if you believe the current system leads to "responsible" alcohol sales, a visit to the street outside the Chinatown LCBO or essentially any Beer Store location will quickly disabuse you of that notion.
Arturo / August 20, 2014 at 02:16 pm
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In the States I was able to buy a half decent 1.75L bottle of Whisky for under $10. In Ontario a similar bottle costs me about $58. That's a price increase of 580%, it is utterly ridiculous.

Arturo replying to a comment from Socialdrinker / August 20, 2014 at 02:16 pm
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Agreed.
jaaaaaaaaaaaaaat replying to a comment from Socialdrinker / August 20, 2014 at 02:29 pm
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yeah no doubt there are a few good places in the USA. But the beauty of the LCBO is that they are all consistently good.
Ive lived in Manhattan, Brooklyn, Philadelphia, Buffalo, and Lancaster- and the majority of places are holes-in the wall.
The prices are cheaper in America, but I think thats because its America, where they can get quantity discounts, and much of the product is domestic (bourbons, whiskeys, beer). Not to mention, they are all staffed by folks earning 8$ an hour. And there is no kickback towards healthcare or education.
discounts please / August 20, 2014 at 02:39 pm
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It is true that domestic booze is probably half the price in the USA, and imported booze is only slightly cheaper than here. But there are more benefits. In many states you can buy Gin and Scotch 24 hours a day in your supermarket. LCBO has WAAAAAY too few outlets; you have to travel some distance to get to one, and their hours of operation are not long enough for 2014. Only Canadians born and raised in Canada don't find our system of alcohol distribution to be very strange.
Trish / August 20, 2014 at 02:51 pm
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I think we better get ahead of the rampant drug and alcohol addiction issues in Ontario first before we go ahead and just start selling alcohol anywhere and everywhere.

TJ / August 20, 2014 at 03:26 pm
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I don't get what is wrong with LCBO now. They are often located in the same plaza/area as a grocery store/pharmacy so it is convenient. Most LCBO stores are pretty huge so the selection is good and relatively consistent. No corner store/grocery store would come even close to the selection each LCBO store has. I also like the consistency of LCBO policy checking for ID under 25/30 so that minors don't purchase it directly. Do you think the owner of a mom and pop corner store, who stands to make money/profit from selling alcohol cares if he is selling to minors? Or good luck having a 16 year old cashier make the subjective call to check for ID at your local grocery store.

I understand price is the issue for most. Do you think a mom and pop corner store with their buying power of 10 bottles of wine a week actually sell alcohol cheaper than LCBO, who'd buying power is tens of thousands?
Brent replying to a comment from GRAARG / August 20, 2014 at 03:32 pm
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The gov't can put the LCBO into bankruptcy to get around the lease issue...or sell the leases (potentially at a profit). It's really not a deal breaker.
Mark / August 20, 2014 at 03:54 pm
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LCBO's are good for two things. Gouging customers and keeping their uneducated staff wealthy beyond their skills. If I can buy liquor and beer at a grocery store in cottage country I damn well should be able to do the same thing in Toronto.
GRBY / August 20, 2014 at 03:54 pm
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These studies get published year-after-year-after-year ......
























BUT NOTHING EVER CHANGES.

I know a guy who makes 120k a year managing an LCBO. He even gets sales bonuses!!!! How can you possibly pay someone for a sales bonus when you have a monopoly? You're issuing a sales bonus to someone who has no competition in his industry LOL.

W. K. Lis / August 20, 2014 at 04:36 pm
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End the alcohol cartel by the government owned LCBO and the foreign owned Beer Store. End the price fixing of alcohol by government.
Amy replying to a comment from W. K. Lis / August 20, 2014 at 04:47 pm
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Stop Drinking. Boycott Alcohol and the governments control of it. Can't boycott then your an alcoholic!
#WinWynne / August 20, 2014 at 05:32 pm
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Sweet! Booze sold everywhere will make for a sweet Ford Nation. Lets shut down CAMH and open a dedicated booze mall on the land.
Anthony / August 21, 2014 at 08:24 am
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I feel like this will go viral or someone will make a video infographic about it and make it go viral. It's the best way to get to the masses. In 2005, social/viral media weren't the influential monster it is today. This has potential.
Jim Smith replying to a comment from jaaaaaaaaaat / August 21, 2014 at 10:55 am
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And in our own country privitiazion + free market has not turned things into a cesspool. Looking at Alberta is far more relevant than the US.
Jim Smith replying to a comment from Aaron / August 21, 2014 at 10:56 am
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Then why does Alberta have a way better selection than we do? The selection of beer in Alberta's privatized store is *far* greater than what we have here.
Jim Smith replying to a comment from Aaron / August 21, 2014 at 11:09 am
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Here are some numbers from 2013 on Alberta's privatization

Selection - production selection expanded from 2,200 to 19,000 varieties of beer, wine and spirits.

Employment jumped from 1,300 employees to 4,000 employees (in stores - number of stores increased a lot).

Comparing prices to BC's government run system, they found prices in Alberta cheaper on 90% of the products. Prices in Alberta did go up initially, but dropped as more stores opened due to competition.

Not sure about tax revenue changes, but the did make 11 billion in tax in the first year after they privatized.

Correction to Jim of Alberta / August 21, 2014 at 02:37 pm
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Correction; Alberta is partially privatized. The retail outlets are still obligated to buy their booze from the Government of Alberta. It's a kind of half-assed privatization, and for the reasons I've given booze in Alberta is nowhere near as cheap as it is in the US. Looking to the US is FAR more relevant than looking to Alberta. And comparing prices to BC is useless; it is waaaay too expensive in BC. Also, Alberta does not have a "better selection". Not by a long ways.
John / August 21, 2014 at 04:07 pm
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Just remember when they give away the 407 how much revenue Ontario lost and loosing everyday to foreigner company now the liberal want to do the same with the LCBO they should have told us before the election of their intention
Canadian Guy / August 21, 2014 at 05:51 pm
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Since prices are fixed by the FEDERAL gov't as well as the provincial, even privatizing wouldn't lower the prices all that much. All the stuff we get for free compared to what Americans pay through the nose for, is a fair trade off to pay 50-75% more for my booze.
Not too bright Canadian Guy / August 22, 2014 at 11:14 am
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Duh... the Government will STILL rake in all the tax money, without the expensive overhead of retailing. Is that really so difficult to grasp?
Chris / August 24, 2014 at 12:26 pm
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The gov't doesn't make a dime off of me. I make my own beer and absolutely refuse to go to the Beer Store. I visit the LCBO maybe once a month to see if there any interesting beers I can clone. I got sick of the Beer Store many years ago with their "Big Ten" and little coasters of beer on the wall right where you take your empties to. I don't have empties, no driving all over town to inconvenient beer stores/LCBO stores. No minimum pricing, I have Happy Hour 24/7 if I want. All tax free.
Strav / September 1, 2014 at 05:44 pm
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Quebec does have it's version of the LCBO - the SAQ, however because alcohol can be bought just about anywhere here - beer and a limited selection of wine at the Dep, beer and a bigger selection of wine at the Grocery stores - the effect that has on the SAQ is that it has really limited its buying power. As a result, the selection of wine really falls off, and the prices are a lot higher. The LCBO is the world's 2nd largest buyer of wine I believe, and because of that you can get your hands on wine that normally can only be bought by travelling to that city, town, winery, etc.

Here's an example of one bottle of wine that can be bought at the SAQ vs. the same at the LCBO. http://www.saq.com/page/en/saqcom/red-wine/la-vieille-ferme/263640?selectedIndex=9&;searchContextId=-1002117335499 vs. http://www.lcbo.com/lcbo/product/la-vieille-ferme-cotes-du-ventoux/263640#.VATmflzyApE

Keep in mind too Quebec has an additional 1.75% sales tax on the above item (a decent wine btw for the money).

With that said, Ontario really should follow the Quebec model. Kill the Beer Store - it's downright silly. All the Dep's here carry beer you'd never here of and they're quite amazing. The argument that the variety stores would only carry Canadian is crazy - they would be stupid to.

The one side effect - LCBO's buying power would likely be chopped in half and you can kiss goodbye any notion of buying hard to find wine. Keep your LCBO, kill your Beer Store and start selling alcohol in the variety and grocery stores.

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